Turning Down the Heat – Interfirm Rivalry Erosion and Its Implications for Competitive Dynamics

We introduce an underexplored phenomenon of competitive dynamics that we call ‘interfirm rivalry erosion’, i.e. the evolution from long-running hostile rivalry towards an economically sensible competition. Drawing from social identity theory, we develop a theoretical model including main drivers, mechanisms, and implications of interfirm rivalry erosion. We put forth a series of propositions on how the rivalry between firms can gradually erode under certain historical and ongoing circumstances. Moreover, we develop a set of propositions on how rivalry erosion can affect former rivals’ competitive word and action moves vis-à-vis one another. By introducing interfirm rivalry erosion’, we aim to complement dominant theories on the rise and persistence of interfirm rivalry, striving to offer a more complete, balanced, and de-escalation-oriented theory of interfirm rivalry.